How to use a British holding company

How to use a British holding company: holding companies own assets. They take part in no operations, but are legal entities that exist in order to own assets, such as shares in other corporations, bonds, private equity funds, hedge funds, and even patents and trademarks. In many cases, they will own the majority of the shares in a limited company, which enables them to oversee the executive management of that corporation, should that be their strategy.

As those other companies make money, the holding company is able to collect dividends, interest, and other profits. If one or more of the owned companies has some kind of financial disaster and goes bankrupt, the rest of the holding company's assets are protected from this. That is why in some cases, a holding company will own a trademark through one subsidiary company, and will also own further subsidiary companies that manufacture the products under that trademark. If one of the manufacturers goes into liquidation, the trademark remains unaffected.

Specific tax arrangements are needed for a holding company to successfully operate. When dividends are received by the holding company, they must be free of withholding tax; if the holding company wants to dispose of its shares in an operating private company, there should be an exemption on the capital gains tax and other local taxes; and when the overarching group that owns the holding company wishes to receive its dividends, it should be able to do so without being liable to capital gains tax or equivalent.

Since 2009, the UK government has made provisions in the laws around tax that foster a profitable environment for holding companies. Most dividends, in an ordinary commercial context, received by a limited company in the UK are free from withholding tax. Additionally, where share disposals take place, the UK has made these disposals free of capital gains tax, providing that some specific requirements are met.

These two changes, in addition to further amendments to tax laws that include major reform of the rules around the taxing of profits made by overseas-controlled companies, have made the UK a very attractive place for holding companies.

If you require further details of the services Coddan Formations Agency provide within our UK holding company registration and subsidiary company incorporation packages, please telephone us on +44 (0) 330.808.0089 or +44 (0) 207.935.5171 for a no-obligation discussion about your needs. If you are looking to register an offshore holding company, or register a holding company in Republic of Ireland, we can also serve your business needs.